Book Reviews

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corruption. Chapter 10 concludes with some general policy recommendations

underscoring the need to make decision processes more transparent and to install
corruption-prevention mechanisms including more extensive punishment of corrupt
actors.
Overall, the book systematically analyzes empirical data and case studies to show
that institutional economics provides an appropriate way to understand and fight
corruption. It will serve as a valuable resource for policymakers and academics
studying corruption. The book also provides extensive literature surveys on a variety
of related topics and carefully presents them in text-boxes to serve a multitude of
readers including students at the graduate and upper division undergraduate levels
and researchers interested in corruption. Equally useful are the appendices that
provide frameworks for further empirical investigation.
One must also be cautious, however. The book leaves out more elaborate and
important discussions on some empirical issues, such as welfare loss that can
result from corrupt deals especially when they minimize efficiency and aggregate
benefits. The use of institutional approach to corruption somewhat downplays the
question of everyday street-level corruption, which in and of itself causes
enormous public outcry in developing countries. In many developing countries,
where corruption is embedded in the normal bureaucratic culture, the notion of
an invisible foot may not fully apply. Here neither corruption requires secretive deals
nor are the corrupt officials considered dishonest and different. In a country, where
the entire political, bureaucratic, and legal systems are corrupt, for example, one
simply accepts the fact that she has to bribe in order to receive some public services
knowing that any complaints would take her nowhere. More careful attention to the
social and cultural norms that perpetuate corruption as an accepted everyday
practice would have strengthened the proposed framework.
Notwithstanding these shortcomings, The Institutional Economics of Corruption
and Reform marks an important milestone in corruption research.

Eastern Economic Journal (2009) 35, 131133. doi:10.1057/eej.2008.7

The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of

Economics. By Eric D. Beinhocker. Harvard Business School Press, Boston, 2006.
544pp., $29.95. ISBN: 1-57851-777-X.

Richard V. Adkisson
New Mexico State University

Economists sometimes find the world they study to be more complex than is
convenient. One result is that many economic models simplify the world beyond
recognition. Eric Beinhocker clearly envisions a day when economists, business
people, and policymakers begin to appreciate and embrace the complexity of the
world rather than run from it. In this book he lays out an approach he refers to as
complexity economics, where economies are viewed as complex adaptive systems
that behave more like evolving biological systems than like the mechanistic
equilibrating systems that have dominated much economic thought. The book
represents a thorough synthesis of a broad range of ideas and may serve to push
complexity and evolutionary thought a bit closer to the center of economic thought.
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Beinhocker breaks his book into four sections. The first section is titled A
Paradigm Shift. It discusses wealth creation, the history of wealth creation, and the
explosive increase in wealth evident in the last century or two. The balance of the
first section is devoted to explaining and critiquing the traditional, equilibrium view
of the economy. The approach in this section sets the tone for the whole book. When
explaining the traditional model Beinhocker gives full credit to the originators of the
ideas, presents them as bright and thoughtful people, and discusses their ideas in
the context of the science of the day. It is a kind and gentle yet thorough critique. He
makes wonderful use of analogy as he explains the traditional model in a way that
even an uninitiated person could grasp. For example, he uses the analogy of a ball in
a rubber bowl to explain concepts such as equilibrium and exogenous shocks. In the
same thoughtful and expressive way he critiques the traditional model and sets the
foundation for thinking of the economy as a complex system.
In the second section Beinhocker relies on the work of several scholars across the
fields of behavioral, institutional, experimental, and evolutionary economics, game
theory, political science, and computer science to define complexity economics and
distinguish it from traditional economics. He identifies five big ideas that distinguish
the two and devotes one chapter to each idea (dynamics, agents, networks,
emergence, and evolution). In this section Beinhocker demonstrates an uncanny
ability to understand a wide range of cutting-edge research, synthesize ideas, and
express the synthesized ideas in a clear, accessible, and engaging way. General
readers will have little problem grasping the implications of the underlying academic
research and scholars who may be interested but less informed about the topics
covered will find that this section provides a quick update on a diverse literature. By
the end of the section the reader should have a basic understanding of each of the
five topics and be well prepared to understand the next section, which explains
evolution as a wealth-creating process.
The third section is introduced with a chapter titled Design Spaces. Beinhocker
begins with a brief discussion of game theory and the notions of strategy, defection,
cooperation, and multiple feasible outcomes. Again relying heavily on a wide range
of academic work, he introduces the design space idea. He refers to the Library of
Babel, where all possible 500-page books exist. Most of the books represent no more
than extensive collections of randomly ordered letters, but also included are the
greatest novels of all time. Thus, within the design space there is wide variety and a
need to apply a fitness function to search the seemingly infinite (but actually finite)
choices and select useful books suitable for replication. He goes on to introduce
three design spaces important to economic evolution physical technology space,
social technology space, and business plan space. In essence, economic evolution
results from the selection and replication of the many choices available in these
spaces. Other things become evident as well. For example, it is not clear that there
are optimal choices and, even if there are, the optimal choice changes as the social/
environmental/technological landscape changes. Likewise, there is no specific
destination (like general equilibrium). Economic outcomes are not predetermined.
The balance of the book discusses the implications of rethinking economics,
moving from the traditional model to the complexity model, for business people and
politicians. This section challenges common models of finance and management.
With respect to public policy, Beinhocker proclaims the uselessness of thinking
about policy along the leftright political spectrum.
Some orthodox economists may find these ideas challenging to their own way of
thinking. Still, fans of markets will be pleased to find that this model leaves a major
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role for markets (though now as evolutionary search mechanisms). While

challenging to conventional thought, Beinhockers way of writing should help
readers keep an open mind. When he writes of competing ideas he does so
respectfully. Likewise, he emphasizes that many of the ideas presented are still in
flux. The original institutionalists and other economists of evolutionary bent might
be slightly offended, as they know that many of the ideas expressed here are much
older than recognized by the author. Thorstein Veblen, who many view as the
granddaddy of evolutionary economics receives, only one brief mention and the
extensive literature coming out of the Veblenian tradition is largely ignored, or at
least not cited. Similarly, Beinhockers discussion of deductive tinkering sounds
suspiciously like the interaction of Veblens instincts of workmanship and idle
curiosity. This is not to say that the original institutionalist will find the ideas
offensive. Most of what Beinhocker says is consistent with this tradition. Rather, it
seems that he was able to draw similar conclusions by retracing the steps of a
different but related strain of economic literature.
Notwithstanding this possible oversight, Beinhocker has accomplished something
that few other authors have accomplished. He has made the evolutionary/
complexity view of economics accessible to the masses. He presents the
evolutionary/complexity view in a modern, forward looking manner. He cites
recent and ongoing research that demonstrates dynamic ongoing developments in
the field. He offers the hope that economic science is improving and breaking the
shackles of 100 years of scientific gridlock.
Beinhocker identifies three target audiences, business leaders and policy makers,
people with a general interest in economics, and scholars and students. These readers
will find the book useful and interesting. This book is not the final word on complex/
evolutionary economics, but it is a wonderful means to get caught up with the
unfolding story. The Origin of Wealth is rich with interesting, wide-ranging topics. It
is engaging and well-written. It deserves to be read.

Eastern Economic Journal (2009) 35, 133135. doi:10.1057/eej.2008.5

Eastern Economic Journal 2008 35